This change in patent policy came largely from the USPTO and the courts, rather than Congress. In 1980 the U.S. Supreme Court, by a 5-to-4 vote, broadened the scope of what is patentable by directing the USPTO to grant patents on human-made, genetically engineered bacteria. In explaining its decision, the Court quoted a 30-year-old congressional committee report for the proposition that "anything under the sun that is made by man" qualifies for patent protection. That decision (and several others like it) signaled to the USPTO an about-face in the decades-long reluctance to expand patent protection. The USPTO interpreted these new decisions very broadly and began to issue patents on computer software--hitherto considered uncopyrightable as mathematical algorithms, since they are not really human inventions.

In 1982, Congress created a special Court of Appeals for the Federal Circuit (CAFC) for all patent cases. The CAFC capped off this trend toward broader patent protection by ruling in 1998 that methods of doing business are patentable.

Patent claims for computer software and methods of doing business inundated the USPTO, and there were few records of prior inventions in these two areas against which to check new claims for novelty. Specious patents were awarded in droves. Far from retreating, the USPTO saw a bureaucratic upside to this surge in patent applications.

The USPTO realized that the fees from granting and maintaining patents created that rarest of American institutions--a government profit center. In fact, the USPTO started openly advocating that its performance be measured by the amount that it contributed to the public coffers.

During the first Clinton Administration, for example, USPTO Director Bruce Lehman attempted to deflect criticism of the USPTO's practices by traveling around the country with a chart showing precisely how much revenue the USPTO raised for the federal treasury. Lehman's approach shocked many in the technology community. "It's like he's bragging about the amount of money he brought in selling plots of land in Yosemite," marveled a Silicon Valley executive. Worse, Congress recognized in the patent system a revenue source and began lifting a portion of USPTO fees to subsidize profligate spending. The USPTO became the federal government's cash cow.

The rest of the country has begun to notice. Distinguished academics and eminent jurists from across the political spectrum, as well as journalists and business commentators of every conceivable stripe, have all begun to ask whether the USPTO policy of patent proliferation makes any sense for a free-market economy. Within the past five or six years, economists in particular have started to question the USPTO's practices, finding little correlation, if any, between patent proliferation and invention. Economists have identified many situations in which patents actually retard the introduction of new products.

The leaders of the USPTO dismiss all such criticism. On policy issues, they seem to interact most frequently with patent lawyers, who make a good living from the present system and have little incentive to change it. Never mind that only about half of the patents litigated in court to final resolution are held valid. To hear the USPTO tell it, more money is needed to issue even more patents. But the pressure for change is building.

If the system is going to be fixed, the USPTO needs to focus on the economic costs of its policies and correct its own balance sheet. The USPTO measures its own net income with all the sophistication of a dot-com, focusing only on the top line--application fees. In all the charts and graphs of "operating results" in the USPTO annual report, there is not a cent attributed to the cost to the public of the slices of the economy it is selling off for monopolization by private interests.

The USPTO needs to be liberated from the burden of its own revenue stream. Patents are not a short-term revenue-generating engine. The USPTO should focus in the first instance on proper patent policy and advise Congress to do the same. If the short-term cost of a more disciplined patent system is to fund the USPTO out of general tax receipts, so be it. Our economy will be far healthier in the long run.

Gary L. Reback has been named one of the "100 Most Influential Lawyers in America" by the National Law Journal. His clients have included Sun Microsystems, Netscape, Oracle, Apple, Borland, and Novell. He also spearheaded the assault to break up Microsoft's operating system monopoly. He is currently a Silicon Valley entrepreneur.

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